The 2 Biggest Things the Washington Post Got Wrong About the Budget

By Matthew O'Brien

Hmm, this chart isn't nearly as scary anymore (Reuters)

It's hard to write about the history of government spending without using the words "as a share of GDP," but that's what the Washington Post managed to do in an almost deliberately uninformative A1 news story. Go ahead, read it. You will not be informed.

Well, you might be informed if you want to know how many King James Bibles fit into the Code of Federal Regulations. (95). Or how many states have fewer people than the federal government does workers. (24). Or how many times you'd have to fill up the District of Columbia with cubicles to equal the government's office space. (2). But so what? Are we supposed to have an opinion about the appropriate Bible-size of the Code of Federal Regulations? (Maybe that was the 11th Commandment?). Well, of course not. These are supposed to be shocking stats that shock you, and they do -- with how irrelevant they are. What does the fact that there are a lot of really, really small states tell us about the federal budget the past few years? Because that's what the article -- headlined "After Six Budget Showdowns, Big Government Is Mostly Unchanged" -- is supposed to be about. Right?

There are two things you need to know about the federal budget right now. First, real spending per capita has fallen at its fastest rate since the demobilization following the Vietnam War. And second, estimates of long-term healthcare spending have fallen substantially just since 2010. But somehow neither of these facts made it into the the Post's story. Instead, it harped on the fact that nominal spending has "only" fallen from $3.457 trillion in 2010 to $3.455 trillion today to make the case that we really haven't cut that much. But we have! The economy has grown since 2010, so spending the same dollar amount now as we did then amounts to a sizable cut in spending as a share of GDP -- from about 25 to 23 percent, to be exact. Now, the article does admit that these small-sounding cuts are actually a 5 percent cut after inflation, which is "something historic." But it doesn't tell us how historic -- there's no context. It just tells us that "even now the government spends a vast amount of money."

Sure, but the economy also has a vast amount of money. Far vaster, in fact. A far more relevant metric is the change in what the federal government spends on each person after inflation. Paul Krugman looked at that for total government spending, and I tweaked it for just federal spending. As you can see below, it's fallen at its fastest peacetime rate on record. The only times it's fallen faster were the demobilizations following the Vietnam and Korean Wars. That's what happens when the stimulus runs out (so much for temporary programs becoming permanent), and Washington stupidly caps discretionary spending at its lowest level in 40 years.

Okay, so short-term spending has fallen quite a bit, but what about long-term spending? The Post is certainly right that programs like Medicare and Social Security make up a big chunk of what the government spends now, and will make up an even bigger chunk in the future -- but haven't been cut very much. Or have they? The story says that Washington has "largely failed to deal with [these programs]," but it ignores the Congressional Budget Office's (CBO) much-improved outlook for federal healthcare spending. As Michael Linden of the Center for American Progress points out in the chart below, over the past three years the CBO has revised down its estimate for federal healthcare spending in 2023 from 7.2 to 6.2 percent of GDP. That amounts to almost $260 billion of savings in that year alone -- and much, much more over the rest of the decade.

Now, it isn't clear why healthcare spending growth has slowed as much as it has, or if it will last. But the CBO thinks it might, because it doesn't think the Great Recession explains the slowdown. In other words, Obamacare might have been the "grand bargain" that cut entitlement spending -- minus the "grand" and "bargain" parts.

The federal government isn't small enough to drown in a bathtub, but that doesn't mean it's too big. The past three years, spending has fallen further faster than any time we weren't bringing troops home. Long-term projections for federal healthcare spending, the biggest budget-buster there is, have fallen fast too. And, as Jonathan Chait points out, the federal workforce as a share of the population is at its lowest postwar level (though that doesn't include contractors).

You might say it's the greatest austerity story never told -- at least in the Post.